Lookback option

Lookback option

An option that allows the buyer to choose as the option strike price any price of the underlying asset that has occurred during the life of the option. For a call option, the buyer will choose the minimum price; for a put option, the buyer will choose the maximum price. This option will always be in the money.

2] and F values in Table VII suggest that the average-strike put option model performs relatively better (worse) on the noninformation-intensive (information-intensive) subsample and that the lookback option model does the reverse.

Therefore, we make use of the probability density function for discrete lookback options in AitSahlia and Lai (1998) to develop our pricing and hedging formulas for the discrete dynamic guaranteed fund.

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